Capital Currents - The FCC’s ‘annual’ report on video competition

So much for the “annual” nature of this report. Why did it take so long?

On July 20, the FCC released its 14th “Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming.” The most interesting part to me was the back story, and the nearly five-year interval between the 13th report and the 14th.

This is a report to the United States Congress. In other FCC annual reports to Congress, there is a footnote somewhere on the first few pages that gives citations to the previous reports. It’s missing here. You know from the title that this is the 14th report, so there must have been a 13th report.

Eventually, if you read through this report, you find a reference to the 13th report in the discussion of the 70/70 provision on page 32. The 70/70 provision says: “At such time as cable systems with 36 or more activated channels are available to 70 percent of households within the United States and are subscribed to by 70 percent of the households to which such systems are available, the Commission may promulgate any additional rules necessary to provide diversity of information sources.” The 70/70 provision is not quite a death penalty for cable, but it certainly is to be avoided at all costs because it gives the FCC authority to regulate virtually any aspect of cable TV.

So if you follow the crumbs and download the 13th report, you see that it was released on Jan. 16, 2009. But wait, it was adopted by the commissioners on Nov. 27, 2007. And all of the research in it was done in 2007. What’s going on here?

If you remember, Jan. 20, 2009, was Inauguration Day. And Jan. 19, 2009, was the day Kevin Martin resigned as FCC chairman. That’s a clue.

Back in 2009, I wrote a column on unethical behavior in Kevin Martin’s FCC. It dealt with a report on the impact of offering programming on an a la carte basis.

The episode of the 13th report was another example of scandalous behavior. It had been clear in each previous report on video competition that the second prong of the 70/70 test was not satisfied. While 36-channel cable systems were available to 70 percent of households, fewer than 70 percent of those homes passed were cable subscribers. But in preparing the 13th report, FCC staff found one set of data that purportedly showed that more than 70 percent of homes passed were cable subscribers. The report was written up that way. All other data sets were suppressed. This was going to be yet another dose of punishment for the cable industry, which refused to accede to Martin’s insistence on a la carte pricing.

But the other FCC commissioners blew the whistle. The draft report was sprung on them shortly before they were to vote on it. They were denied access to other sets of data from other sources until 7 p.m. the night before the vote. According to one commissioner, he then saw that the FCC’s own data showed that only 55 percent of homes passed were cable subscribers. As their statements indicate, if Martin had brought that version of the report up for a vote, at least three of the five commissioners would have voted no.

So the 13th report was adopted in November 2007, with the conclusion that the 70/70 test was not satisfied. But then, instead of releasing it to the public and sending it to Congress, Chairman Martin sat on it … for more than a year.

But that’s not all, folks. Also in November 2007, the FCC adopted a notice of inquiry, soliciting updated data to prepare the 14th report. That notice was also suppressed until January 2009. It asked for data from 2007. So in June 2009, the FCC, now under a new chairman, had to issue a supplemental notice asking for data from 2008 and 2009.

Ah, the new broom, right? Well, maybe not exactly. There is no hint of scandal about the conclusions in the 14th report. In fact, there are no conclusions. The FCC staff crunched the numbers, and the report is an endless stream of numbers. As mentioned above, the title of the report is “Annual Assessment of the Status of Competition in the Market for the Delivery of Video Programming.” But there is no assessment. The numbers clearly show that the delivery of video programming is a highly competitive market. But nowhere in the report can you find that conclusion stated. With regard to the 70/70 test, the FCC does say that “only 45.3 percent of households passed by incumbent cable systems subscribe to these systems, compared to 56.3 percent reported in the 13th report.”

So, is there any scandal here? The scandal is that it took from 2009, when the data was submitted, until 2012 to issue the 14th report. So much for the “annual” nature of this report. Why did it take so long? The FCC doesn’t say. While the current administration at the FCC might be squeaky clean, they don’t seem to be able to make the trains run on time.